Merriam-Webster, defines “subsidy” as: “Money that is paid usually by a government to keep the price of a product or service low or to help a business or organization to continue to function.”
As of 2012, the global amount of fossil fuel subsidies has been estimated to be in the range of $544 billion, according the the International Energy Agency, although the IMF has estimated it could be closer to $2 trillion in post-tax subsidies. America alone accounts for $502 billion of the post-tax subsidies that IMF estimates. "The fact that energy products are taxed much less than other products...contributes to the high level of post-tax subsidies," explained the IMF in their report. The numbers are staggering, especially when compared to the global subsidies for renewable energy (which actually needs them) being just $101 billion as of 2012.
To be fair on the United States, the top spending countries on more direct subsidies come from the underdeveloped economies you might expect: Iran, Saudi Arabia, Russia, India (300 million Indians have no electricity), Venezuela, and China. However, of the developed world economies, America predictably comes way out on top, giving nearly 3.5 percent of GDP if considering the post-tax subsidies. Not only do these subsidies make little economic sense, they also accelerate greenhouse gas emissions when the world is in desperate need of rapid decrease.
The IMF report said: “[Fossil fuel] subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources.”
Just to give a historical perspective on energy subsidies, lets look back on Americas history in providing them. America’s rapid growth can be directly contributed to its energy development, and during the development of fossil fuel energies during the nineteenth and twentieth centuries, key growth years saw as much as five percent of the federal budget providing help in subsidies to these new producers. When adjusted for inflation, about $1.8 billion per year in subsidies were spent on oil and gas during their formation, much more than what the renewable energy market has received annually since the 90’s. Through the 80’s and 90’s, the federal government spent $137 million on important research that helped develop today’s booming hydraulic fracturing industry.
This is all contrary to what many who criticize renewable energy subsidies might believe; that the fossil fuel industry somehow thrived right away in the free market without any assistance from the government. It is simply not true. The point of showing this is that government subsidies are not bad things, especially when they help to form an industry that will benefit countless lives in the future. But when these government “hand-outs” are still being provided to the wealthiest industry on the planet that is doing considerable damage to our environment, you have to wonder why.
ExxonMobil, the fifth largest corporation in the world with annual revenue over $400 billion, receives an estimated $600 million annual tax break, which comes from the $4.8 billion subsidized by taxpayers, according to Mother Jones. The average annual tax break for oil and gas from 1918-2009 was about $5.2 billion per year, compared to $2.2 billion per year for renewable energy from 1979-2009.
So why would we still provide an industry long established as profitable that happens to be leading contributors of environmental degradation these generous tax tax breaks? Shouldn’t these billions of lost dollars be spent on other things like infrastructure, education, or maybe investment in renewable energy?
As expected, it always lead back to who has the money. The oil and gas industry provided more than $70 million in political donations in 2012, compared to a measly couple million from renewable. But this is just a slice of what oil and gas spends on lobbying; more the $1.4 billion in the last fifteen years. Lets face it, its long been established that the majority of American politicians do not work for the people, but for big corporations who help them get elected.
If our world was sane, we would stop subsidizing an industry that has long ago ceased needing the help. Today it is simply inane corporate welfare. Lee Raymond, the former ExxonMobil CEO, once said on American fossil fuel tax breaks: “As far as my company is concerned, it does not make any difference whether it is there or not.”
America cannot stop other countries from handing out these regressive subsidies, but we can certainly stop giving them out ourselves. Rather than helping these dirty industries, we should start investing more in renewable infrastructure and provide greater incentives for people to consume less and look for alternative energy sources.